18.00 With that, we're closing up the live blog for the day. Thanks for all your comments and we'll be back with the regular business and markets liveblog in the morning. In the meantime you can find all the latest news on the Spending Review here.

17.49 One of the biggest disappointments for the business community was the much smaller-than-promised local growth fund, says Phil Orford, chief executive for the Forum of Private Business. Mr Osborne triumphantly revealed the fund would get £2bn this year, and £10bn in total until 2020. Mr Orford said:

Given the disappointingly small amount going into the fund, the onus now is on the 39 LEPs to submit clear and convincing growth strategies focused on a small number of key local policies if they are going to make real change.

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17.30 Conservative MP Andrew Selous could do with a quick refresher course as well, it would seem.

17.23 Economically, little has changedsince George Osborne announced his budget in March, says economist Howard Archer.

In terms of prospects for the economy, the Spending Review does not fundamentally change the picture, particularly in the near term. The spending cuts of £11.5bn announced for 2015/16 had already been flagged up by the Chancellor in the March 2013 budget and this is essentially providing the detail of where they will actually occur. There are no more spending cuts in total to occur than had already been announced.

Similarly, while the Chancellor announced that GBP50 billion of capital spending will be made in 2015/16 and set out capital spending pans to 2020/21, this confirmed the figures set in the March budget. No extra investment spending has been introduced on top of the extra GBP3 billion a year from 2015/16 that was set out in the March budget. It is again mainly a case of setting out where the capital spending will occur. More details of this are due to be announced shortly, with road, rail and affordable housing projects featuring.

The Chancellor spoke for the best part of an hour; the Shadow Chancellor for just over 11 minutes. But the key part of the debate came in the instant just before George Osborne rose to deliver his reply. Osborne is not a confident performer at these events. His voice is too weak to really command the chamber. He was also delivering some pretty bleak economic news. He had to acknowledge that the Government had again missed its borrowing targets and was unveiling some tough public service cuts.

But he was relishing the moment. He couldn’t wait to spring back to his feet. Why wouldn’t Ed Balls just come out and tell the truth, he asked? Despite all the attacks on him and the Prime Minister, why was Ed Balls not prepared to say what he wanted to say, namely that despite borrowing spiralling out of control, Labour wanted to borrow more? He had a simple question: the Government’s spending plans had just been unveiled to the last penny – did Labour want to match them, or did it want to exceed them?

Ed Balls listens to Chancellor George Osborne speaking in the House of Commons today. Photo: PA

16.58 The Evening Standard has focussed on Osborne's requirement for foreigners to learn English or face losing their benefits:

16.57 Wonder what the Chancellor was talking about today? Here's a snapshot of his biggest concerns, courtesy of Westminster Advisers:

16.42 The Chancellor made much of a protected science budget in his spending review speech, but the Campaign for Science and Engineering warn that this is not enough to achieve Mr Osborne's stated goal of putting the UK at the forefront of scientific research.

They note that the UK's position on the global league tables for science spend is sliding - it is 7th in absolute terms and 25th in percentage terms. And Mr Osborne's commitment to keep the budget steady really means it will fall in line with inflation to the tune of £276m from now until 2015/16.

His commitments are welcome in the context of the scale of cuts applied across all government departments. However, in the context of the scale of commitment to science and engineering for economic recovery by our global partners, the UK is now lagging further and further behind.

It is vitally important that the UK sets an upward trajectory for investment in science and engineering that will ensure we regain our place in the premier league of scientific nations.

The Foundation has also produced a chart showing the impact of Mr Osborne's spending decisions to date. The bars represent the percentage by which spending will have risen or fallen by 2015-16, since 2010-11.

16.25 So where does Mr Osborne's spending review leave us on austerity?

According to the Resolution Foundation, the cuts the Chancellor is behind schedule if he is to hit his deficit reduction target, and the worst is yet to come.

Here's an excerpt from their analysis (emphasis ours):

On current plans for deficit reduction, further consolidation of around £26bn would be needed in the two years to 2017-18, over and above what has already been announced. Without further tax rises or welfare cuts this would require departmental cuts to speed up by more than 50pc compared to their current pace. Simply keeping departmental cuts to their current pace would require a further £10bn of tax rises or reductions in welfare spending.

16.14 Oxfam applauds Mr Osborne's decision to grow the government's aid budget in line with international commitments. But it also reminds the Chancellor that poverty exists at home, too. Ben Phillips, Oxfam’s Director of Campaigns, said:

The Chancellor’s decision to put a cap on overall social spending could take away support that the most vulnerable people rely upon. We’ve already seen an explosion in the use of food banks and the largest annual increase in poverty in a decade and a further £4 billion of cuts to the welfare budget can only make things worse.

Two protesters sit with their placards outside the Houses of Parliament on Wednesday. Photo: Getty Images

16.03 The Chancellor's spending review failed to address a rising tide of child poverty, according to Unicef. The charity says that 300,000 more children fell into absolute poverty in the UK last year. Here's Anita Tiessen, deputy executive of Unicef UK:

The Chancellor reaffirmed his policy of getting people into work but the truth is that for a growing number of families work isn't paying. What was striking in the recently published child poverty figures is that around two thirds of children live in families where at least one adult is in work and yet they are still living in poverty. School spending is being protected, but progress in education will be short-lived in the long-term if poverty is not tackled.

15.51 Most commentators I've listened to so far agree with Jeremy (see 15.32). The spending cuts don't go far enough. Here's Gillian Fawcett, head of the public sector department at the Association of Chartered Certified Accountants (ACCA), on welfare:

While the cap on the annually managed expenditure (AME), which totals £350 billion, almost half of all government expenditure, goes some way in getting a grip on this out of control element of public expenditure, that grip is loose. It is a short-term approach to tackling welfare spending, which forms a large chunk of AME expenditure. A cap is a quick and easy fix. There needs to be a more structural look at the AME budget – a review of the drivers behind each expenditure within the AME’s welfare expenditure.

The Chancellor had a golden opportunity to once and for all take a radical approach, possibly by devolving parts of AME and gaining a thorough understanding of the drivers behind AME so as to get a firm handle on what amounts to, at £350 billion, almost half of all government expenditure. He made the first tentative steps towards tightening the purse strings on AME, but much more needs to be done if we are to see more and more of that part of public finance becoming more accountable.

It is encouraging to see, however, the Chancellor make the right noises when it comes to managing this unaccountable and expensive part of the public purse. It is also a positive step that the Office of Budget Responsibility will have a role to play in warning that the Government was in danger of overspending.

15.45 An update from Mr Islam:

In 2010, the spending review also focused on gross investment, I should have said. The net investment numbers are in budgets and autumn statements. The general point still applies. Investment is not going up, as you would have thought from listening to the speech. So perhaps a little less egregious and a bit more cute.

I was quite shocked to hear the chancellor claim that investment spending would be £50bn. This would be fiscal stimulus territory. I got some return tweets about PSGI: “Public Sector Gross Investment”. Then the chancellor talked of £300bn of investment. That too sounded quite high. Again it was gross investment.

The traditional standard measure of government investment spending is “net investment” which accounts for depreciation on the government’s giant stock of capital. It is the way government investment has been measured for decades.

So it was a bit cheeky, a little cute, for the chancellor to switch measures for his speech. This is clearly part of an effort to communicate a narrative of “investing in growth” as we go “from rescue to recovery”. The real numbers would have to wait until the fiscal documentation was published.

Alas it was nowhere to be seen. The only reference to net investment was as a footnote to a table about the impact of the Royal Mail pension. Nothing. Nada. Gone. Erased. PSGI is now the only measure, and it has the happy side effect of sounding bigger.

However you can compare PSGI announced today to PSGI in March in the OBR’s table. Miraculously those numbers are idenitical to the number’s published today. Actually that’s not quite right: this year PSGI is £100m less than forecast by OBR in March. So, officially, capital investment by government has been CUT. That’s not the impression you would get from the chancellor’s speech.

I deduce that it’s £155bn over the next six years rather than the £300bn figure used in Parliament. I’m not sure that even Gordon Brown would have tried this one. In fact, in similar circumstances, he did not.

Lights, camera…er. In terms of drama, today's spending review always was going to be a bit of a non event – largely leaked as it was, encompassing only the first year after the next general election and detailing "just" £11.5bn of additional spending cuts. If the Government is to reach its target of balancing the books by 2017/18, far bigger cuts will have to be imposed in the two years thereafter. The really tough choices have yet to come.

Indeed, listening to the Chancellor, you'd be hard pressed to find the cuts at all; there seemed to be at least as many new spending commitments as there were savings. Looking at the cuts actually announced, £5bn of them, or nearly half, are to come from unspecified "efficiency" savings. Believe them when you see them. Quite a bit of the rest come from ending "automatic progression" in public sector pay, a practice which helps explain why the public sector pay bill has continued to rise even in a period of substantial job cuts and an apparent pay freeze. No wonder the Treasury found negotiating these cuts so easy; it's just pie in the sky when you die.

As to what the Chancellor did announce, including the commitment to cap welfare spending for four years, you have to ask yourself why in two years time and not now? What's to stop the welfare cap coming in straight away? Presumably, it's the Prime Minister's commitment not to cut pensioner benefits this parliament, for it is hard to see where else effective cuts to the welfare budget are going to come from. In any case, the Government continues to be far too cautious in its approach.

15.27 Duncan Farrow-Smith, defence partner at Deloitte, says the Government must "work harder" to reduce costs in the civilian workforce:

The measures announced today were as expected, with no further cuts to the Armed Forces and a one per cent increase year-on-year in the equipment budget in real terms. However, the Department will have to work harder to reduce costs in the civilian workforce. This will be dependent on major change programmes being delivered such as the Materiel Strategy.

Cyber remains a key priority for Defence. Increasing investment by 3.4% in the Intelligence Services budget is evidence the Government recognises the need to grow its cyber capabilities. This trend is being seen on a global basis in countries with similar economies to the UK.

15.21 Two clips from our video team. Here's George Osborne saying that public sector workers will not get an automatic pay rise:

With its references to Britain's past as the place 'where the future was invented', the Chancellor's speech was long on vision, but short on detail. But the parallels were compelling - Britain is to spend more on roads than it has for half a century, and more on rail than it has since the Victorian era.

Two and half years after the Chancellor pledged to do something very similar with the National Infrastructure Plan, cynics will be queuing up to say they've heard it all before.That sense of deja-vu extends to the numbers being quoted. £50.4bn of capital investment in 2015/16 is exactly the same as that previously announced for 2014/15.

Maintaining that level of government spending is admirable, but still fails to address the elephant in the room - the private sector's continued reluctance to heed the Chancellor's calls for it to invest in infrastructure too.

The Chancellor left many questions unanswered, including exactly which are his priority projects for infrastructure investment. The industry will be waiting anxiously for more clarity from Danny Alexander on Thursday.

15.08 Time for a Spending Review recap:

• Civil servants will no longer be entitled to automatic pay rises from 2015/16. Employees currently move up a pay grade each year and bag the extra money that came with it. No more.

• There will be 144,000 more job losses in the public sector.

• Members of the armed forces will be protected from these reforms.

• The Government will invest £3bn in affordable housing and freeze council tax for two years. This will cut £100 off the average bill for families.

• £50bn has been set aside to build moreroads, railways, bridges and broadband networks. This means the Government's plans for infrastructure spending amount to more than £300bn of capital spending to the end of this decade, Osborne claims.

• On welfare:

- There will be a cap on spending, set each year for four years. If the Government breaches this cap, the Office for Budget Responsibility (OBR), the Government's independent forecaster, will issue a public warning.

- Winter fuel payments to expats in "hot countries" will be stopped.

- Jobseekerswill have to visit the Jobcentre once a week rather than once a fortnight if they want to sign on. Claimants will also have to attend language classes if they do not speak English.

15.00 Philip Hammond, Defence Secretary, says he has got the best deal of any department without a ring-fenced budget.

He says the cuts agreed with George Osborne "will have no impact on military manpower or equipment".

Hundreds of millions of pounds will be saved by "renegotiating contracts with industry and reforming the way we procure equipment".

But hundreds of civilian jobs will still be for the axe and civilian allowances are likely to be cut.

He's put out this broadcast to staff at the Ministry of Defence:

14.46 John Cridland, Director-General of the CBI, struck a sceptical note at the Chancellor's pledges to make investments in infrastructure.

Infrastructure is rightly singled out as the most effective engine for growth, as we urged. While the Government talks a good game on infrastructure we’ve seen too little delivery on the ground so far.

George Osborne gave what was clearly his best parliamentary performance since becoming Chancellor. His delivery was unmarred by any lapses into falsetto nervousness and the political punch lines were delivered with robust confidence. And, goodness knows, the political points came in droves. This was a list of triumphalist accomplishments that were worthy of a Gordon Brown budget. But the central theme of getting more for less money would have been utterly alien to the Brown (or Miliband) Doctrine.

But, amidst all this talk of getting more for less and cutbacks in spending actually producing better services, there was an obvious question: why didn't that principle apply to the NHS where spending remains adamantly ring-fenced? Is healthcare unique in the scope of human endeavour in that cost-cutting reforms which can bring abour more efficiency and better productivity in every other sphere could have no such effect on its performance? Why on earth not? Or is the refusal to admit this possibility simply one more function of Mr Osborne's deeply political spending review?

14.36 Business secretary Vince Cable has voiced his approval of the chancellor's plans for his department::

I made it clear that I would fight for a deal that ensured the government had a credible growth story.

The settlement we've achieved for this spending round does exactly that by prioritising and protecting activities that are key to growth. We have secured a robust funding package for science and innovation, skills and apprenticeships and more money for the regional growth fund, creating jobs outside of London, and the Green Investment Bank.

We are also unique in having a two year capital funding guarantee, with a three year guarantee for science funding, giving business the certainty it needs to invest alongside government commitments.

14.23 And there's also more clarity on what exactly a "hot country" is (see 13.23):

14.17 There's been speculation about why "Manchester City" is getting £155m from the Treasury in 2016-17:

<noframe>Twitter: Faisal Islam - "Manchester City Deal" gets &#163;155m from Osborne in 2016-17. Is that Tevez? We already own their stadium... <a href="http://t.co/66iOqJEiyM" target="_blank">http://t.co/66iOqJEiyM</a></noframe>

14.04 The British Chambers of Commerce is sceptical about the £50bn investment announced for infrastructure. John Longworth, Director General, says:

The government’s record on infrastructure announcements and spending commitments remains far better than its record on delivery. Major road, rail and energy infrastructure projects must get the green light and proceed without further delay.”

But it wasn't all brickbats. Here's the bouquet:

In many respects, businesses will be encouraged by what they have heard from the Chancellor. He and his team have signalled important investments in areas like transport, export support, science, education, innovation and defence procurement, which are of great importance to companies of all sizes. Business will also be pleased to see an end to automatic increases in public sector pay, and will support moves to begin to tame welfare spending.

<noframe>Twitter: Paul Waugh - Spending Round was clearly printed in a hurry. Britian? Is that a Birt-ian version of Britain? <a href="http://t.co/GDnFImVRA5" target="_blank">http://t.co/GDnFImVRA5</a></noframe>

13.49 Osborne tells Treasury Select Committee chairman and Conservative MP Andrew Tyrie that the Government hopes to publish more details of its spending plans further in advance. "The certainty we now have for the 2015 will mean better public policy," he says.

Former Labour Chancellor Alistair Darling asks how much of the funds going towards transport investment is public money, and how much will be raised from private sector?

"The transport money we set out is public investment," says Osborne. "We are also setting out changes to infrastructure delivery in Whitehall to accelerate delivery of projects. This has bedevilled past Governments and we want to set it out."

John Redwood asks: "Should foreigners have to work in Britain for a period of time before qualifying for benefits?" Osborne replies:

I'm prepared to look at any ideas on welfare. One of our challenges is about the eligibility of benefits of people who move here. We are hemmed in by European law but there may be some opportunities to work within EU law and we're looking at those.

13.43 The Government will keep entry to UK museums free "so people can visit our museums and see the antiquated economic policy set out by the last government".

Entry to venues such as London's Science Museum will be kept free (Photo: Alamy).

13.42 Osborne begins to respond, but is quickly told off by the Speaker for answering questions by asking questions - "it's against parliament protocol," says John Bercow.

I will leave it to the country to ask these questions," says Osborne.

I have set out total managed expenditure for £745bn and its up for all members to decide whether they support that.We don't know the position of the opposition because on Saturday their leader said there would be no more borrowing. On Sunday the Shadow Chancellor said there would be.

We've set out welfare plans that help people get back into work. Does he support those or not - that's the question the public will ask. In October 2010 he said we were taking a huge risk with crime. Crime is down. He said the university reforms would shut out those from disadvantaged backgrounds. Record numbers of students from disadvantaged backgrounds are getting into universities.

We've had plenty of tough talk and divisive rhetoric but on their watch the benefits bill is soaring. The social security bill is up £21bn.

The Chancellor is making the wrong choices on growth and social security. And departmental spending as well. When thousands of front-line police officers are being cut, why is he spending more on police commissioners? Why is he spending billions on a reckless NHS restructure that the public doesn't support?

There is a lot of detail he didn't provide for the house. We look forward to see if he is going to continue free museum entry. Fewer police officers in 2015/16 on top of the 15,000 we're losing in this parliament. Fewer nurses in 2015 on top of 4,000 we've already lost?

People up and down the country want to know the answer to these questions. They should be in no doubt the scale of extra cuts announced today to police defence and local services are due to his abject failure to get the economy back to growth.

13.35 Ed Balls's eleven minute riposte describes the Government's record on the economy as a "comprehensive failure on living standards, growth and the deficit too".

Does he remember what he told the House three years ago? He said the economy would grow by 6pc but it's grown by just 1pc. He pledged to get the banks lending, but the banks lend less month on month on month. The AAA credit rating has been downgraded not once but twice. He promised living standards would rise but their falling year on year on year.

He promised to balance the books but that balance is in tatters. His friends call him George. The President calls him Jeffrey. But to everyone else he's Bungle. Even Zippy on the front bench can't stop smiling. Calm down, Zippy.

Barely a mention for broadband investment, which is rare for Osborne and probably because the government has been forced to massive scale back subsidies for its "Connected Cities" initiative by legal challenges from BT and Virgin Media.

A big infrastructure programme is to become a voucher scheme for small businesses, which is a little embarrassing.

13.25 In future, people will need to turn up to the Jobcentre with a CV and register for online job searches before they can become eligible for benefits. Jobseekers must visit the Jobcentre once a week, not once a fortnight, and claimants will need to wait seven days before they can claim benefits. "Those first seven days should be spent looking for work and not looking to sign on," says Osborne.

And if you don't speak English, you'd better start learning. "From now on if claimants do not speak English they will have to attend language courses until they do," he says.

"This is a reasonable requirement. If you're not willing to learn English your benefits will be cut."

Together, these reforms bring the total additional welfare savings in 2013 up to £4bn. Step by step this reforming Government is making sure Britain is living within its means. With this statement we make more progress towards an economy that prospers, a budget we can afford and a deficit coming down.

13.23 Housing benefits, tax benefits, disability benefits will be included. But the state pension will not be, says Osborne.

Including the state pension would mean a Government could offset a rise in working age benefits with a cut in pension benefits. That penalises those who have worked hard all their lives. That is something this Government will not do.

We will stop the winter fuel payments to living abroad continuing to rise. Paying out even more money to people of all nationalities who worked in this country years ago but no longer work here is not fair.

I'm not sure how he will measure this, but Osborne says that the Government "will link the winter fuel payment with a temperature test".

People in hot countries will no longer get it, he says.

13.19 Now to benefits and the Government's Annually Managed Expenditure (AME) portion of Government spending. AME funds pensions, welfare and debt interest.

There are two groups involved in the welfare system, says Osborne. Those who need it, and those who pay for it.

"We've been making sure benefit payments don't rise faster than wages," he says. "The steps we've taken will save £18bn a year and each one was opposed by the welfare party opposite."

The Government will introduce a welfare cap to control the cost of the benefits bill. "Welfare spending was put into AME, but it wasn't managed at all and the cost went up by a staggering 50pc even before the crash," he says.

The cap will be set each year of the budget for four years. If the Government is close to breaching this cap the Office for Budget Responsibility (OBR), the Government's independent forecaster, will issue a public warning, and the "Government will be forced to take action to cut welfare costs".

13.15 On to the NHS. Osborne says:

The NHS is the people's priority. Its budget was £96bn when we came to power. In 2015/16 it will be £110bn and capital spending will rise to £4.7bn. The demand for NHS services is rising so we've not spared from demanding reform in this service. There are already 7,000 fewer managers. The NHS will continue to make efficiency savings. This investment will enable more money to go to mental health and treatments for cancer.

In the 2010 spending review, we said the NHS would make available £1bn a year to support health needs of those in social care. It worked and saved hundreds of millions in the process.

13.13 The Government commits to extra resources to tackle tax evasion. "We expect to raise £1bn more in tax revenues from those who try to avoid paying their fair share."

I know not everyone believes we should spend 0.7pc of national income on development," Osborne adds. "But I am proud that this government has stuck to its pledge."

13.10 The education budget has been increased to £53bn. School spending will be protected in real terms, and allocated in "a fairer way". Osborne says:

Now the lowest funded local authorities will get an increase in per pupil funding to make sure no child in any part of this country will be discriminated against. The pupil premium we have introduced makes sure we are fair to children from low income. It's getting £4.6bn, and over £21bn investment over the next parliament.

We will fund an unprecedented increase in the number of free schools. We will provide for 180 new free schools in 2015/16.

We will not make our children pay for the mistakes of the past. That is the single best investment this country can make.

13.07 James Kirkup tweets:

<noframe>Twitter: James Kirkup - MoD says its overall cut is 1.9pc, or &#163;875m. Confirms a v good result for Philip Hammond. He's still one to watch. <a href="http://search.twitter.com/search?q=csr2013" target="_blank">#csr2013</a></noframe>

13.05 Britain will spend on average more as a percentage of its national income in this decade than in the previous decade when Government spending was being wasted in industrial quantities, says Osborne.

The Transport department will get £9.5bn - a commitment the Government will repeat every year to 2020. "We are already massively expanding investment on road schemes. This is the largest programme of investment in our roads for half a century," he says.

"We're committing to largest investment in railways since the Victorian era."

13.01 Although transport will see a 9pc cut in resource spending, capital spending gets a big boost. Osborne commits £50bn of capital investment in 2015 in projects from "roads to railways, bridges to broadband, science to schools". HS2 gets the green light.

"That means £300bn capital spending guaranteed to the end of this decade," he says. "Today we raise our national game."

12.55 William Hague is praised as "the best Foreign Secretary we've had in a generation." And after some shouting from the House, Osborne says that Theresa May is the best Home Secretary too. Osborne says:

They said crime would rise. What has happened? Crime has fallen by more than 10pc thanks to the hard work of the police officers up and down this country crime is at its lowest level in 30 years.

The Home Office will have cuts of 6pc. The police budget will be cut by less than that. They will be encouraged to share services. The police counter-terrorism budget will not be cut at all.

12.53 The defence budget will be maintained in cash terms, says Osborne. The equipment budget will be £14bn and will grow by 1pc in real terms thereafter.

"We will reduce the civilian workforce and overhaul the way we buy resources," he adds.

We will not cut the number of soldiers, sailors or airmen and we will give them the best equipment to do their jobs. We also make a major commitment to invest in cyber. That is the new frontier of defence.

The intelligence services are on the front line too. Silently and often heroically they protect our citizens. They will get a 3.4pc increase in their combined resource budget.

12.51 Funding for museums will be cut by 5pc. But, says Osborne, "We will make sure the site of the battle of Waterloo will be restored in time for its 200th anniversary. It is a tribute to the victory of coalition forces to overcome a discredited former regime which impoverished millions." Laughter erupts.

12.49 The Government is committing £3bn towards building affordable homes.Council tax will be frozen for two years, saving each family £100.

"That brings savings for families to £600 over this parliament," says Osborne.

12.48 Tim Ross, Telegraph political correspondent, is on Govewatch inside the House of Commons:

There has been lots of speculation about big cuts to the non-schools bits of Michael Gove's education budget, like childcare and further education. The Education Secretary is in the Commons but he's hiding, tucked away behind the Speaker's chair, out of view of the TV cameras. Either he doesn't want his reaction captured when Osborne announces deep cuts, or, if it's good news, he will miss an opportunity to look smug on the front bench.

12.46 Every job lost in the public sector has been offset by three new jobs in the private sector, says Osborne. "In the last year, five new jobs have been created for every job cut in the public sector and the central argument for those who fought against our plan have been demolished by the enterprise and ingenuity of British businesses."

"The Treasury will lead by example," adds Osborne. "Our resource budget will be reduced by 10pc. The Cabinet Office will also see its budget cut by 10pc."

He says that Eric Pickles, the Communities Secretary, has cut his departmental budget and slashed eight quangos. "He is the model of lean government," says Osborne. The House erupts with laughter.

12.43 Osborne says the Government will end the automatic pay rises for the civil service. There will be 144,000 more job losses in the public sector, he says. The armed forces will be excluded from these reforms.

12.42 James Kirkup notes:

George Osborne has started speaking and a lot of MPs are noting that he looks remarkably pale-faced. Is he wearing make-up? Politicians often do at big events, because it allows them to go straight into a round of TV interviews. But what looks OK on screen can look very odd in the flesh.

12.40 Osborne says that "the biggest single saving we have made is £6bn a year less we are spending on paying our debts".

12.35 Osborne:

We've always understood that the greatest unfairness was loading debts onto our children that our generation didn't have the courage to tackle ourselves. It's possible to get better public services at lower costs that you can cut bureaucracy and boost enterprise. The opposition has to these ideas collapsed into incoherence.

Today I announce the next stage of our economic plan to turn Britain around.

In its last year in office the previous gov was borrowing one pound in every four - a record for a British Government in peace time.

Three years ago we set out plans to make savings and reduce our borrowing. Instead of £170bn, this year we are set to borrow £108bn - That's £49bn less in borrowing - vitrually the entire education budget.

12.34 There's echoes of Osborne's Mansion House speech as he declares that the action taken by the Government to bring the deficit down by a third has taken the economy back from the brink of bankruptcy. The economy is "out of intensive care and moving "from rescue to recovery", he says. The Spending Review is based on three principles:

1.) Reform: to get more from every pound we spend.

2.) Growth: to help win the "global race".

3.) Fairness: to make sure "we're all in it together".

12.33 George Osborne stands up. Here we go.

12.30 Matthew Holehouse writes:

Charlotte Leslie calls for a "root and branch review" into the "sinister culture of cover-up" in the NHS. She says Labour buried three reports into NHS problems. Cameron agrees, and says there was a "culture problem" under Labour.

Crispin Blunt asks the PM to amend the National Planning Policy Framework to protect the greenbelt. Cameron says the rules haven't changed and the NPPF gets the balance right.

"What has his Government got against the people and businesses of Sheffield?" asks Megg Munn, citing the movement of TA bases.

"It is a fantastic city," says Cameron.

Stephen Pound asks about the whereabouts of Lord Gold's report into Tory party donations. David Cameron last week promised he would raise the issue of how much tax Labour paid on donations - and he did not disappoint.....

12.23 "What is the Government doing to tackle youth unemployment?", asks one Labour MP.

Cameron says that Britain's "flexible labour market" will enable the economy to "perform alongside the Netherlands and Germany" which have low youth jobless rates. He also claims that "as we stand today, employment in the UK is growing faster than any other G7 country, including Germany".

12.21 Matthew Holehouse is also watching PMQs:

More Labour MPs going after the PM on infrastructure. He is "faffing around". Cameron cites the redevelopment of Battersea power station as proof of inward investment.

Ben Gummer says Labour promised two schools in his constituency but it took a Tory Government to deliver them.

On Stephen Lawrence: the PM says "nothing is off the table" and more inquiries will be held if necessary. "We need to get to the bottom of it."

Cameron is asked if he discussed fag packets with Lynton Crosby, the adviser. He says he was never "lobbied". But he says Labour's selections are being rigged by its union funders and claims "that is the real problem in British politics."

12.10 More from Rowena:

David Cameron and Ed Miliband are clashing over spending and borrowing already in the Prime Minister's weekly PMQs. The PM swipes at the Labour leader before the first question, digging at the last Government's destruction of the economy. Ed Miliband hit back by questioning on his lack of progress at building new big infrastructure, especially schools, hospitals, housing and children's centres. Cameron says you can't build a nuclear power station overnight, and points to a better record on building roads and 300 miles of electrified railways. He also points out how disastrous the PFI schemes started by Labour were for the public finances.

Ed Miliband is scoring quite a few blows. He gets a laugh as he quotes Nick Clegg admitting "the gap between announcement and delivery is quite significant".

David Cameron's biggest bet is asking Ed Miliband whether he would rule out borrowing more if he wins the next election. The Labour leader has twice dodged the question.

"No wonder it's not just people at Wimbledon saying new Balls please," quips Cameron.

12.05 It's a rowdy session in the Commons. Ed Miliband and David Cameron are arguing over how many schools the government has built. 261 schools have been promised, only one has started. Why?

On infrastructure, Miliband says just seven out of 576 projects outlined by the PM have been completed and 80pc have not been started. The PM says at £33bn a year the budget is £4bn than under Labour.

Miliband says Labour built 100 new hospitals and 3,700 new schools. Cameron says Britain was left with a huge PFI debt.

12.01 Conservative MP Gordon Henderson asks how the Government plans to keep mortgages affordable for his constituents.

David Cameron says the Government will stick to its plans for a "sensible fiscal policy" and won't be taking Labour's advice. On Saturday Ed Miliband was saying that Labour would control borrowing, while on Sunday Ed Balls said "borrowing would go up," says Mr Cameron.

11.59 Prime Minister's questions will begin shortly. George Osborne, David Cameron and Nick Clegg have taken their seats on the front bench.

11.48 Symbolism, of sorts. George Osborne's Land Rover has become stuck behind a Boris Bus on his way to the Commons. Hat tip tothe Spectator's Harry Cole.

"What we see again today is the British people paying the price of this Government’s failure," he said, speaking on his doorstep this morning before heading to Westminster.

"They tell us the economy is healing, the Government but actually things are getting worse for ordinary families. What we actually need is a fairer plan to get growth moving, living standard rising and the deficit down.

"The answer is to invest now, in homes and schools and transport. That would mean we’d have to make less painful decisions later on and also fairer choices. Fairer choices to tax the bank bonuses and put young people back to work.

"If we were in government now we’d be reversing that millionaire’s tax cut and protecting the tax credits that make work pay. We can make different choices on tax and spending and investing now to get the economy going."

Even if The Ministry of Defence manages to avoid cutting front line troops, cutting civilian jobs could still be harmful, says Philippa Tuckman, a military claims solicitor at Bolt Burdon Kemp.

She said: "Today’s decision not to make any further reduction in military capability will come as a qualified relief, but, in reality, some services could still be stretched to breaking point.

“Cutting civilian jobs is not without risk, far from it. Any cuts in areas like training and maintenance, for example, could leave armed service personnel exposed to an increased risk of injury or death while on active duties. A lack of training was cited in the recent high-profile judgment in the Snatch Land Rover / Challenger II cases, indicating surely that more investment in this area is needed, not less."

11.33 Political correspondent Rowena Mason sends this update from Westminster:

There's a bit of a row about whether the Chancellor should have taken a bigger slice out of welfare spending during his Spending Review.

Lord Lamont, the former Chancellor, argues that he should be taking a closer look at ring-fenced areas of spending, including the NHS, benefits for the elderly and pension payments.

"I think there’s got to be a re-examination of it. Things like winter fuel allowance, the free bus passes, I think they've got to be re-examined for better off people," he told Sky News. "But I think also one's go to look at the basic pension. Should there as Ed Balls suggested - or came near to suggesting - actually be a moratorium on increase for a couple of years?"

Nadhim Zahawi, a Tory MP, also said “everything should be open to review” ahead of the next election, including universal benefits for pensioners.

“First of all, we’ve made a promise to pensioners and we’ve delivered on it, which is the triple lock. We will not go back to the days of insulting pensioners with a 75p increase in their pension; when you make a promise you have to deliver on it.

“One of the issues that I think [George Osborne] will address today is pensioners living overseas still claiming winter fuel allowance, and I think it’s important to be able to send a message out that what you can’t do is if you are privileges and living in a hot country, take money for cold weather payments."

11.30 Meanwhile, a fascinating chart from YouGov. There is strong public consensus that spending on the NHS, schooling and policing should be maintained. And there is a powerful consensus that if anything has to go, it should be overseas aid (70pc want it gone). But voters are split with what to do with defence (20pc cut, 17pc say protect) and welfare (39pc cut, 16pc say protect.)

11.25 "What next for Paul Tucker?" asks the Guardian'sJill Treanor.

He replies that it has been "terrific" to be a central banker and a "privilege to serve the country in that capacity".

"I've got wonderful opportunities, I hope, when I leave, just to do different things".

11.23 Back to lobbying. Andrew Bailey says that he is "absolutely convinced" that it has increased over the past 20 years. He adds that there was "pressure on regulators to back off because we were in good times".

"We have to temper this because it clearly has becoming an increasing factor," he adds.

Tucker says that the answer would depend on why interest rates were rising, and says there are also risks if long term yields stayed low for a very long time.

"If yields remain low for a very long time, one possible explanation is that the western world economy has remained very weak [...] In that case default rates would increase," he says.

He says the BIS's big message is that central banks "can create time" and smooth the adjustment, but the real side adjustment has to come from households and firms, and "ultimately from supply side reform". He adds: "Our contribution to this is to require the resiliance of bank balance sheets [which is] good for growth in the medium term."

10.56 Paul Tucker is asked to comment on the recent market volatility. He says the "violence" of the adjustment over the past fortnight has underlined the extent of the recent "search for yield" by investors.

Regulators must pin down "whether or not there are vulnerable links in the system that could jeopardise stability", he says.

"The Fed had talked about slowing the pace of adding to monetary stimulus, but they haven't talked at all about withdrawing monetary stimulus and the economic conditions are such that susbstantial stimulus will persist for a long time".

The recent volatility underlines market "pertubations" and the potential fragility of markets. "In that sense its an amber light," adds Mr Tucker.

10.50 Not all risks are financial, says Mr Tucker:

There is rightly increasing emphasis on cyber attacks. We need to ensure those efforts are properly focussed and co-ordinated. The FPC recommends [the government] should work with core UK financial system and its infrastructure to put in place a programme of work to test resilience to cyber attack.

Mr Bailey says he was not personally lobbied. He describes himself and Paul Tucker as "old hands" at the supervision game, but notes that the way the process works has changed. "There is a lot of contact [now]," he says. "The difficulty is that we want to operate a process that is transparent and accountable."

He says that there should be "ground rules" about how lobbying is done. At the moment it is not "transparent, accountable and open" and says lobbying "went on extensively before the crisis".

10.35 Paul Tucker, the Bank's deputy governor for financial stability, runs through its conclusions on the strength of UK bank capital buffers, together with how bank stress tests will be conducted in the future.

In light of the recent market volatility, Mr Tucker says he has asked the Financial Conduct Authority and Prudential Regulation Authority to provide an assessment to the Financial Policy Committee of the vulnerability of borrowers and financial institutions if interest rates rose suddenly.

10.26 The Financial Stability Report press conference will begin shortly. At the bank's last outing in November 2012, it called on lenders to increase buffers and reminded of the dangers posed by the eurozone debt crisis.

10.16 Bank of England ratesetter David Miles (pictured below) has been explaining why he has voted to pump an extra £25bn into the economy for the past eight months. He told a conference in London:

The recovery in demand and the level of growth in the UK remains pretty anemic, pretty weak, and it’s appropriate to look to monetary policy to support growth even more.

10.13 The FTSE 100 has moved higher this morning and is now up 0.8pc, or 50 points, at 6,151, continuing the recovery staged by the benchmark index yesterday when the blue-chips puts on 1.2pc. On the FTSE 250, also 1.2pc higher so far today, interdealer broker ICAP is the heaviest faller, plunging 8pc on a downgrade to "hold" from "buy" at Societe Generale. That has also dragged on rival Tullett Prebon, which is off 3.7pc.

09.59 The Spending Review is likely to dominate the headlines this afternoon. But before that, Sir Mervyn King will hold his final press conference as Bank of England Governor when the Bank presents its latest Financial Stability Report at 10.30am.

You can watch it live here. We'll bring you more news from the press conference as it happens.

09.48 Sky News has a live ticker of the size of the UK's government debt running at the bottom of the Jeff Randall show. That's £1.2 TRILLION:

09.39 The Cabinet is now fully briefed on where the axe will fall, according to David Cameron:

It looks likely that relative to plans there will be another small increase in capital spending - although let's be clear, it will still remain a long way bellow its peak.

Mr Johnson suggested there was "a good chance" that the government would bring in tax rises rather than more cuts after the next general election. He said:

The scale of the cuts are really astonishing [...] If you really do carry on with the next two years up to 2017-18 as pencilled in that will result in a whole slew of government spending one third or more less than it was in 2010. So, if I was a betting man I would think there would be some kind of tax rises after the election.

09.16 Things aren't looking so good for Go-Ahead, which operates bus and passenger rail services in Britain and school buses in the US. According to Mark Manduca and his team at BoAML, the bus may be heading toward the budget cliff:

Investors who have been waiting for a short-term catalyst for Go-Ahead’s shares may find their opportunity. Specifically, we expect Go-Ahead’s shares to underperform ahead of the Spending Review on Wednesday 26 indications that the Treasury will have to make a further 10% cut to the overall Department for Transport budget. Such cuts could take the form of 1. BSOG (a fuel duty subsidy), 2. Concessionary fares and/or 3. Tendered services. And while the ultimate severity/mix of the cuts is uncertain, we feel the argument boils down to the fact that Go-head has the most financial budgetary exposure (c. 60% as a % of group EBIT) to domestic UK bus & rail out of all the listed operators.

09.08Stagecoach is a strong riser this morning, up 4.7pc after the company posted well-received full-year results. The transport operator reported adjusted pre-tax profits of £218.9m, which was better than the market had expected and higher than £202.5m in 2012. Generally, however, it's a big for bus companies like Stagecoach.

Investors will be watching the Spending Review closely today to see if there are any cuts to the fuel subsidy, called the Bus Service Operators Grant (BSOG). Analysts at Bank of America Merrill Lynch (BoAML) estimate that Stagecoach receives about £65m from BSOG.

<noframe>Twitter: Spooky - <a href="http://www.twitter.com/lukeymoore" target="_blank">@lukeymoore</a> <a href="http://www.twitter.com/George_Osborne" target="_blank">@George_Osborne</a> if so, would work better if he had ketchup stains on his shirt. would give it that believability factor.</noframe>

Mr Osborne's biggest announcement today will be about his plans to cap the Annually Managed Expenditure portion of Government spending. AME funds pensions, welfare and debt interest. Capping it, either in cash terms or as share of GDP, could mean deep and lasting cuts in spending in future years, and arguably even reshape the British State.

[...] The ringfences protecting spending on the NHS, English schools and international aid have become part of the political landscape. But watch for gaps appearing in them. David Cameron has hinted at using some aid money to fund military operations, which would please the Tory Right. Philip Hammond, the Defence Secretary, has bid for cash from the health budget to look after the Armed Forces, and other ministers eye the ringfenced budgets with avarice. Will today mark the first work to dismantle those fences after the next election?

The Home Secretary and the Defence Secretary have both irritated colleagues in No 10 and 11 with their public fight against cuts in their budgets. Both are suspected of harbouring leadership ambitions, and using the Spending Review to advance those ambitions. Will they be seen to have been rewarded or punished? The Mayor of London is, as ever, worth watching too, since the review will have consequences for London, especially transport. Another opportunity for Boris to lob another grenade at Dave?

08.12 Troubled miner Bumi has also released a trading statement this morning. More from theTelegraph'schiefbusiness correspondent Louise Armitstead in hermorning email:

Bumi has said production in the past quarter is up 27pc compared to last year in a trading statement released ahead of its annual meeting in London today. Apart from whether Nat Rothschild will turn up, the hot topics include the £201m blackhole in the company's Indonesia assets, the boardroom infighting and the continued suspension of the shares. The company also wants to appoint John Mazoni as chairman, although the former BP boss is said to be holding out until the dust settles.

08.08 The FTSE 100 has dipped 11 points to 6,091 in early deals this morning, a slip of 0.2pc in what has been a fairly muted start to the day's trading. On the FTSE 250 - up 23 points at 13,475 - oil and gas exploration group Afren is the biggest riser with a 7pc jump. Traders have sent the shares higher after the company that a well off the coast of Nigeria had made a "significant" oil discovery.

08.03 And Balfour Beatty, the infrastructure group hit by two profit warnings this year, has announced the sale of its stake in Exeter Airport (pictured, below) to Patriot Aerospace, the aviation division of Rigby Group, as part of it's on-going restructuring.

The airport, which was bought from Devon County Council in 2007 for £60m, was sold for an undisclosed sum. In a statement, Balfour said:

The carrying value of the Group's investment had been written down to £nil in 2012. The proceeds from the sale will be used to repay the funders.

07.48 Elsewhere, insurer Direct Line has announced plans to slash up to 2,000 jobs as part of its own cost cutting drive.

Direct Line wants to save £100m from its cost base by 2014. In a statement, Paul Geddes, Direct Line's chief executive, said:

We have not made these proposed changes lightly and understand the impact they will have on our people. As we have done in the past, we will deal fairly and carefully with those impacted, and do all we can to support them through these changes.

07.39 But while there will be cuts, businesses will be eager to hear about the Chancellor's investment plans. Top of the list? Infrastructure.

Business Secretary Vince Cable agreed a settlement with Mr Osborne over the weekend to support growth measures, and the Chancellor is expected to announce plans to build investment in roads, broadband and energy projects.

07.25 Three letters dominate today's business agenda: CSR.

Chancellor George Osborne'sComprehensive Spending Review will outline an extra £11.5bn of cuts to Whitehall departments as part of the Government's austerity drive. Health, schools and overseas aid are protected from cuts. Winter fuel payments and other benefits for pensioners are not.

In total, departments face cuts of between 8pc and 10pc in the 2015-16 fiscal year.

George Osborne will stand up at 12.30pm, after Prime Minister's questions.